Raising my interest rate

Recently, the US central bank increased the borrowing “interest rate” for the second time in a row. It said, “The committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate.” The markets lapped up the statement, especially the “gradual” bit, and started rallying. The markets always wait breathlessly for such inelegant statements by the Fed. On its part, the Fed is often guarded about its intentions, providing broad guidance (“gradual increases”) rather than precise information. If, instead, the Fed announced a target, such as inflation should be 4 per cent, there may be situations where its true goal could be 2 per cent. The markets could figure out the Fed’s true intentions over time, act accordingly, and discount or disbelieve what the Fed says the next time. Hence, broad guidance seems more believable, as shown by the markets in their rally after the Fed statement.

I can tell you this because I am an investor in a market that draws an interesting parallel to the stock market. That market is the online dating market. Granted, online dating is a complicated market because, unlike stock markets or gold markets, the items being traded are not commodities. Also, no money changes hands. (I know what you are thinking. Yes, plenty of money changes hands over “hunka-hunka” love. But I will not touch this topic. Sorry.) Back to the dating market: I say I am between 20 and 28 years old and between five feet eight inches and six feet two inches tall, investors (potential dates) would lap me up, simply because I offered broad guidance (ranges). Any investor would know I couldn’t possibly run out of that range I just provided. In other words, they would see me as range-bound, as offering less scope for manipulation, and as increasing my “interest rate” in the opposite gender. 

Now, what if instead of broad guidance, I offer precise information, something the Fed seemed to avoid in its statement. Okay, let’s try that out. I say I am rich, I am fun, and I post pictures of male models instead of myself. I hide my prolonged hairline recession, my romantic unemployment, and the fact that I belong to a class of investors who are constantly looking to “trade up”, that is, see someone until someone better comes along. I also hide the fact that I have nothing better to do than look at internet dating sites, that I have no hobbies, no particularly good way to make money, and that I keep playing the online dating market till 2 am. 

Photo: iStock

This way, I go for inflation, that is, I inflate my online persona, in the hope that this would raise my “interest rate” in girls. Initially, the markets might fall for that, but the truth will out itself over time: my past consumers (former investors or dates) could expose my fraud on internet forums, and such market-sensitive information could reach investors, making them wary of not just my profile but other profiles as well (there are many like me who misrepresent themselves in their quest for high yields). Hence, my lies and the lies of others would make investors disbelieve dating profiles. Just as stock markets would discount the Fed’s 4 per cent inflation target and take it to mean 2 per cent, girls would heavily brush off what people like me have to say, thanks to hyperinflation of our profiles (“I am fun, I am rich,” remember). And really, n oone is immune to the temptation to exaggerate a bit, not even women — I Skyped a 72-year-old widow Jamaican who claimed to be 60 on her profile. 

All this puts honest investors in a bad spot. No wonder, the market comprises bulls and bears only, no butterflies. (Tip: If you are an honest and stability-minded trader, go for 10-year and 20-year US Treasury bills. These are a favourite with Chinese daters.)
 

ashish.sharma@bsmail.in